BUY & SELL RECREATIONAL PROPERTY IN CANADAGeraldine Santiago, Realtor

Self-Counsel Press(a division of)International Self-Counsel Press Ltd.Canada USA

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INTRODUCTION xvii

PART 1 — PREPARING TO BUY RECREATIONAL PROPERTY 1

1 SEARCHING FOR THAT PERFECT RECREATIONAL HOME 3Where Do You Start? 3Factors to Consider When Looking for a Recreational Home 4

Community 4Neighbourhood 4Privacy 4Preferred activities 5Accessibility 5Seasonal or year-round property 5Maintenance 5Strata or condominium restrictions 6Zoning 6New-home warranties 7

Homes Directly for Sale by the Owner 8

2 TYPES OF RECREATIONAL PROPERTIES AND TYPES OF OWNERSHIP 9Cottages and Summer Cabins 9Floating Homes 9

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CONTENTS

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vi Buy & sell recreational property in Canada

Condominiums 10Ski-in/Ski-out Condominiums 11Ski Chalets and Winter Cabins 11Mobile Homes, Mobile-Home Parks, and Land-Lease Communities 11Hunting Cabins 12Ranch and Farm Recreational Homes 12Title and Ownership 12

Freehold 12Leasehold 13Strata title 13Co-operative 13Co-ownership 13

3 ASSEMBLING YOUR TEAM OF PROFESSIONALS 17Real Estate Agent 17

Responsibilities of your agent 17The exclusive buyer’s agent contract 18Who pays the agent’s commission? 18What do agents do to earn their commission? 21Are agents allowed to receive bonuses or other gifts from financial institutions? 21How do you choose an agent when buying a recreational property? 21Do agents provide referrals to other professionals? 21

The Difference between a Lawyer and a Notary Public 22Choosing a lawyer or notary public 22The role of the lawyer or notary public 22

Recreational-Home Inspectors 23Environmental Experts 23Protecting Your Legal Interest 23

Title insurance 24

4 FINANCING 25How Do You Get Financing for a Recreational Property? 25What Are the Types of Mortgage Loans? 25

Conventional mortgage 25High-ratio mortgage 26Insured mortgage 26Assumable mortgage 26Condominium mortgage 26Open mortgage 26Closed mortgage 26

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Vendor take-back (VTB) mortgage 26Portable mortgage 27Reverse mortgage 27Blanket mortgage 27Vacation property mortgage 27

Mortgage Insurance 28Mortgage default insurance 28

Mortgage Interest Rate 28Mortgages for Vacant Land 28How Much Down Payment Do You Need? 28Appraisals 29The Documents the Lender Will Require 29

5 OWNERSHIP AND TAXATION 31GST/HST 31Property/Land Transfer Tax (British Columbia and Ontario) 31Property Classes 32Property Tax Assessment 32

Who pays for the property taxes of the current year? 32

6 LAND AND WATER ISSUES 33Maps 33

Forest recreation map 33Topographic map 33Plan 34Agricultural land reserve map (BC) 34

Surveys and Survey Certificates 34Hiring a surveyor 34Survey notes 34Geotechnical survey 34

Land Issues 34Land title search 34Setback 35Access roads 35Buying acreage or vacant land 35Profit à prendre 36Mineral rights 36First Nations lands 36

Water Issues 36Waste management systems 36

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viii Buy & sell recreational property in Canada

Water supply 37Flood plains 38Marine (submerged) cables 38Shorelines properties 39Wetlands 40Legislation and regulatory bodies 40

7 BUYER BEWARE! 43Protect Yourself from a “Leaky Condo” 43

What is a special assessment? 44Beware of Buying a Former “Grow House” 44Mould Issues 45Precautions When Using Wood Heating 45Potential Problems with Oil Tanks 46

How can you know whether an underground oil tank is leaking? 46Provincial and territorial standards for oil tanks 46

Electric Wiring Issues 46

8 BUILDING A RECREATIONAL HOME, AND OTHER OPTIONS 49Can You Build on Your Property? 49Location 50Estimating Costs 50Financing 51The Builder 51

Finding and hiring a builder 51Communicating with your builder 51Overseeing the progress 52

Preparing the Land 52Power and telephone lines 52Water and sewage 52

Building Inspectors and Municipal Inspectors 52Alternatives to Building a Recreational Home 53

Prefab homes 53Camping on your land 53

9 BUYING RECREATIONAL PROPERTY AS AN INVESTMENT 55Determining Investment Potential 55The Importance of Location 56

Accessibility 56Exposure through events and films 56

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Contents ix

Recreational activities 56Increasing the Property Value 56

10 NON-RESIDENTS: BUYING AND SELLING RECREATIONAL PROPERTY 59Can Non-Residents Buy Real Estate in Canada? 59

Canadian currency 59Can non-residents obtain financing to purchase recreational property? 59Down payment 60

Residents of the United States 60Can a Non-Resident Reside in Canada, and for How Long? 60Taxes 60

Residence status and income tax 60Important Information for a Non-Resident Selling a Recreational Home 61

PART 2 — PROCEEDING WITH THE PURCHASE 63

11 MAKING AN OFFER 65What to Look for When Viewing Properties 65

Seller’s motivation 65Prior offers 65Property condition 66

What Should the Offer to Purchase Include? 67Competing or Multiple Offers 67Evaluating Recreational-Home Prices 70

How sellers price their homes 70Comparative Market Analysis 70Comparing unique properties 71

12 REMOVING SUBJECTS 73Subject Clauses 73

Why do you include subject clauses in the contract? 73The most common subject clauses 74What does it mean to remove subjects? 74How long do you have to remove subjects? 74

Recreational-Home Inspections 75What should an inspection include? 75Cottage inspection 75Condominium inspection 75Single-detached home inspection 76What if you don’t want to have an inspection done? 76Can you get a relative or friend to do the inspection? 77

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x Buy & sell recreational property in Canada

An inspection for a remodelled property 77The cost of the recreational-home inspection 77Can the agent pay for the recreational-home inspection? 77When the home inspection fails 77

Removal of All Subjects before the Subject Removal Date 78The Deposit 78

What if the deposit cheque is NSF? 78Where does the deposit go? 78

13 CLOSING COSTS FOR BUYERS 81What Happens at Completion? 81

Title insurance 82Fire and liability insurance 83

Additional Closing Costs 83Adjustment costs 83Transaction levy 84Appraisal fee 84Survey certificate 84New home fees 84Legal fees 84Homeowner’s insurance 84

PART 3 — SELLING YOUR RECREATIONAL PROPERTY 87

14 WHAT IS YOUR RECREATIONAL HOME WORTH? 89Why Are You Selling? 89How Do You Know What Your Recreational Home Is Worth? 89

Comparative Market Analysis (CMA) 90Pricing land only 90

Increasing or Decreasing Your Price 90

15 GATHERING DATA AND LEGAL DOCUMENTATION 93Title Search 94Survey Certificate 94Property Condition Disclosure Statement (PCDS) 94Oil Tank Removal 95Zoning Information 95Municipal Assessment 96Restrictions 96

Other information for strata property 96Other Documentation 96

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Measuring Your Property 97Pre-Sale Building Inspection 97

16 SELLING ON YOUR OWN OR WITH A REAL ESTATE AGENT 101What Are the Costs of Selling a Recreational Home? 101Do You Have What It Takes to Sell Your Own Recreational Home? 102What Are the Pitfalls of Selling without an Agent? 102What Are the Benefits of Selling with an Agent? 103

Choosing the right selling agent for your recreational property 103Agents specializing in rural land 104

Types of Listings 104Open listing 104Exclusive listing 104Multiple Listing Service 104

The Listing Agreement 105Responsibilities of Listing Agents 105

The agent’s commission 108

17 MARKETING YOUR RECREATIONAL HOME 109What Do You Do to Market a Property? 109

Print advertising and websites 109Signage and tools of the trade 110Marketing to friends, relatives, and neighbours 110

Advertising 110

18 SHOWING YOUR RECREATIONAL HOME 113Showing Made Simple 113

Providing access to a recreational home 113Open Houses and Agent Tours 114

Dos 114Don’ts 115

Protecting Yourself 116

19 THE OFFER 117Separating Qualified Buyers from the Lookers 117Who Can Be Legally Bound to a Contract? 118When You Receive an Offer 118

Condition precedents 118Multiple offers 118Lowball offers 119

Negotiating a Sale 119

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What to negotiate 120Selling your furniture 120

When You Reach an Agreement 120What if the recreational home does not pass inspection? 121

Showing after Accepting an Offer 121When Condition Precedents Are Met 121Suspicious Transactions 121

20 CLOSING, COMPLETION DATE, AND POSSESSION 125The Closing Procedure 125What Happens at Completion? 126

Reimbursement of property taxes 126Capital gains tax 126Completion must be done on a weekday 126

Possession 127When do you hand over the keys? 127What should you leave behind on possession day? 127What should you not leave behind? 127Doing a walk-through with the buyer or buyer’s agent 128A special touch 128

APPENDIX: COTTAGE ASSOCIATIONS IN CANADA 129

GLOSSARY 133

CHECKLISTS1 Gathering the documents for the lender 292 Subject removal 793 Documents and information 984 The contract 123

SAMPLES1 Buyer-agent fee agreement 192 Commission agreement 203 Property condition disclosure statement 684 Listing agreement 106

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There are many options available to recreationalhome and property purchasers. You must con-sider your preferences for location and lifestyle.Couples or partners purchasing a recreationalhome together may need to make compromisesor trade-offs. Choosing the right recreationalhome for you and deciding which areas best suityour needs are very personal choices.

Assess your personal preferences and thinkabout the kind of lifestyle change living on arecreational property would entail, even if it’s forshort vacations. For most people, a recreationalhome does not necessarily translate to living in arustic log cabin in the thick of the woods. Rather,their ideal recreational home may have all thecomforts of home, including custom cabinetry,spacious master suites, a gourmet kitchen, a hometheatre system, specialty flooring, nine-foot ceil-ings, a landscaped backyard, a games room, andmore. As a first time recreational purchaser, youneed to think about what kind of needs andexpectations you have (and determine how unre-alistic some of these expectations may be!).

Where Do You Start?Start looking for recreational real estate proper-ties by scanning classified advertisements, Inter-net websites, and local real estate magazines.Multiple Listing Service (MLS), put out by theCanadian Real Estate Association, contains in-depth details of properties and is a valuableresource. An MLS feature sheet can contain infor-mation such as —

• price;

• total area;

• previous year’s taxes;

• monthly charges pertaining to strata titleownership;

• distance to schools;

• distance to transportation services;

• parking facilities (e.g., garage, multiplecar park);

• outdoor areas such as a large lot, balcony,patio, and/or sundeck;

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SEARCHING FOR THAT PERFECT RECREATIONAL HOME

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4 Buy & sell recreational property in Canada

Recreational home purchasers who are semi-retired or retired may want a more peaceful andtranquil setting, away from the noise and hustleand bustle of a community, and perhaps closer toa golf course or a beach.

NeighbourhoodWhen considering the neighbourhood you want,look at the area surrounding your recreationalhome. Are the neighbours similar to you? Arethey young couples, families with teenage chil-dren, or retired couples?

Talk to the residents in the neighbourhood,and walk around the area to get a better sense ofthe community. You may want to find out aboutthe local politics: Do the locals resent the num-ber of city people who are buying property forseasonal use? Are there strong views from thelocals about whether to allow more density asmore recreational buyers move into the neigh-bourhood? Will you spend enough time in the community to be affected by local politicaldifferences?

Consider potential pollutants in your chosenneighbourhood. Noise pollution may be causedby highways, industry, or airports; odour pollu-tion may result from farms or industry; andchemical pollution may come from farms, indus-try, or even golf courses (which are maintainedusing pesticides, herbicides, and fertilizers).

You may find the quality and availability ofmunicipal services important, such as hospitals,police and fire departments, road maintenance,garbage collection, mail delivery, and snowremoval. Make sure that you understand whatservices the neighbourhood has to offer andwhether or not they are suited to your needs.

PrivacyWhen buying recreational property — whether itis a one-acre property or a 20-acre property —many people want or need privacy from theirneighbours, or from the world in general. Different

• geographical features, and views from theproperty;

• nearby recreation centres and/or fitnesscentres;

• central location;

• type and number of fireplaces;

• swimming pool, hot tub, and/or sauna;and

• library and/or games room.

The MLS feature sheet is a very importantdocument because potential buyers rely on theaccuracy of the information. The information isincluded in a computerized data system to whichthe real estate board in your area contributes.The list can be obtained from the local board,from your realtor, or by browsing www.mls.ca orwww.realtylink.org.

Note that the MLS does not include “For Saleby Owner” (FSBO) properties on its website. Onlyproperties listed by an agent are included. (Seethe section Homes for Sale by Owner later on inthis chapter, as well as Chapter 16, for moreinformation on FSBOs.)

Factors to Consider When Lookingfor a Recreational HomeLocation, location, location! When searching foryour recreational property, think about your andyour family’s lifestyle needs. Some things to con-sider: the type of community and neighbour-hood, privacy, preferred activities, accessibility,seasons and climate, strata restrictions, zoningand developments, and home warranty.

CommunityMost cottage buyers base their decisions onprice, but lifestyle requirements are equallyimportant. Younger couples, for example, oftenwant to be close to a small community wherethey and their children can enjoy communityevents and programs.

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Searching for that perfect recreational home 5

types of fences can be used to obtain privacy,including chain-link fences, wooden fences, ortrees along the border of a property. It is impor-tant for owners of recreational property to realizethat although they have a variety of ways toobtain privacy, they may not block off accessroads, rights-of-ways, and so on.

Preferred activitiesWhat activities you prefer to participate inshould also be considered when purchasing yourrecreational home. What do you plan to do onyour property? If you plan to raise horses or farmworms, is this permitted? Are you allowed to fishor hunt on your property? Note that fishing isstrictly regulated by each province and you dorequire a licence to fish on your property. Beforemaking any plans to fish, contact the provincialgovernment for current regulations.

AccessibilityFew city dwellers concern themselves with get-ting around by car. The situation is quite theopposite for many recreational homeowners.The nearest public highway cannot always beaccessed from the local public road; sometimes itcan only be accessed via a private road. You mustinvestigate whether the access is public or privateand whether there is a restrictive covenant ontitle (see Chapter 6 for more information). Youmay also want to consider who is responsible forthe upkeep of the access or roadway and whetherit is open year-round.

In some situations, the cottage may be on anisland and accessible only by water. Provisionsmust be made for water transport as well as park-ing facilities on the mainland.

Accessibility to your recreational home isvery important for many reasons. One thing toconsider is resale value: usually, people living inthe city want a very short distance to get to theirrecreational property, with minimal commutinghassles.

Equally important is access in and aroundthe area where you purchase. For example, somewaterfront cottages can only be accessed bywater taxi, and this can increase your vacationexpenses. If your getaway can only be accessedby way of a water taxi, seaplane, train, or ferry —or perhaps a combination of these — think of thecost of each of these transportation methods asthis will add to your cost of owning a recreationalproperty, especially if you were to commute on aregular basis. Also, you will need to consider thecosts of transporting supplies and materials if you were to fix, renovate, or build on yourproperty.

Seasonal or year-round propertyIs the area in which you are planning to purchaseideal for year-round activities or only for sea-sonal activities? If you owned a recreationalhome in British Columbia’s Okanagan Valley, forexample, you could enjoy swimming, boating,and waterskiing in the summer, skiing in the win-ter, and wine festivals throughout most of theyear. This provides the recreational-home ownerwith maximum enjoyment of the property.

If you intend to use your property year-round, you should be looking for a property thatis winterized — property that can be used andoccupied during the winter period. Non-winterizedproperties need to be prepared for vacancy dur-ing winter months. For example, waterlines mustbe drained and water supply shut off.

MaintenanceMaintenance is always a concern, especially ifyou do not spend time on the property year-round and you have not hired an in-house care-taker. You may want to find out if you can hirethe assistance of a local caretaker who will workon a weekly or monthly basis to ensure that yourhome remains secure and undamaged. Some-times, you will find your neighbours in the sameor similar situation, in which case you can perhaps

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6 Buy & sell recreational property in Canada

bylaws, rules, or regulations that impose restric-tions or prohibitions. It is very helpful to obtainstrata council meeting minutes going back as faras possible — at least for the past 12 months —and including the most recent annual generalmeeting.

Common restrictions include age restric-tions, which, for example, specify that somedevelopments are designated for adult-only resi-dents; rental restrictions, which limit the numberof residential strata units that can be rented; andrestrictions on the size, weight, number, and typeof pets. Restrictions are not necessarily a nega-tive issue for homebuyers. For example, althoughthere may be restrictions that limit or prohibitrentals, this may be a positive factor for buyers,in that most or all the occupiers of a building arealso owners.

Most strata corporations also place restric-tions on the following:

• “Use” — specifying what activities cannottake place on the property (such as run-ning a business)

• Window coverings — imposing unifor-mity of colour of window coverings

• Waterbeds — prohibiting, requiring dam-age insurance, or restricting their locationwithin the building

• Hot tubs — prohibiting placement onroof decks because of potential damagefrom leaks or weight

• Hardwood floors — prohibiting thembecause of noise, especially in framebuildings

ZoningUnder the authority of the municipal govern-ment, zoning specifies the types of buildings thatmay be built on particular properties and howthose buildings may be used: as residential prop-erty (a single-family unit, a multi-family unit,and/or a duplex), as recreational property, or as

hire a caretaker together. Another option is tohave a system in which your neighbours checkyour recreational home when you are not vaca-tioning there, and vice versa.

Perhaps there is a local recreational home-owners’ association or cottage owners’ associa-tion where a caretaker or a property manager ofsome sort is already hired. Contact the associa-tion in your area and find out what your optionsare.

Another option is to rent out the property,either directly or through a rental company.More and more rental companies specializing inresort-type recreational properties not only offerproperty management services, but will take careof everything from marketing and booking guestsfor your property to cleaning and dealing withemergencies. In any type of rental activity, therewill be some risk of damage to your property, somake sure that you have the proper documenta-tion, insurance, and permits to allow for renting.

Strata or condominium restrictionsBuying a condominium involves a type of hous-ing ownership that is more formally known asstrata title ownership. In addition to ownershipof a unit, you share ownership of common areas,such as hallways, garages, and elevators, andshare financial responsibility for their mainte-nance with the other owners of the building. Thisis reflected in monthly maintenance charges.

If you are interested in purchasing a propertysuch as a condominium, find out about thebylaws and other rules that govern that property.You may also want to ask for documentation onthe history of the property and include, in youroffer to purchase, a statement that you are satis-fied with the disclosure statement that the sellerhas provided. (Property condition disclosurestatements are discussed in Chapters 11 and 15).

Restrictions vary from one housing develop-ment to another. Find out what the restrictionsare and whether there are strata corporation

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Searching for that perfect recreational home 7

a commercial or industrial building. Look forzoning information on your MLS feature sheet.Ask about the zoning of surrounding propertiesto determine if, for example, a factory or condo-minium development might suddenly appearnearby. Also be aware of the possibility of zoningchanges in the future. If you purchase a homewith a view, for example, check to see if that viewis legally protected. Find out whether there areheight restrictions that will keep someone fromerecting a building that will block your view.

Zoning and developmentsZoning in areas where there are recreationalproperties differs significantly from zoning in amore established community or city. Most homesin a city are found in subdivisions. There arehighly developed city plans, and residences aredeveloped in predictable patterns. Lots are usu-ally based upon subdivision agreements regis-tered on the title of the property. Theseagreements set out the pattern of the building,confirm water, sewage, and other utilities, andestablish the layout of roadways, sidewalks, andparks.

Cottage developments rarely follow a pre-dictable pattern or plan. Cottage properties thatborder waterfronts have often been subdividedover the course of many years. Development inthe area may be sporadic. In many cases, munic-ipal involvement is kept to a minimum and mostof the day-to-day concerns are handled by cot-tage associations.

Some municipalities in cottage country havepassed seasonal zoning provisions. This couldvery well prevent the conversion of a cottage intoa year-round recreational property or retirementhome. If this is in your plans, be sure to verify thezoning bylaws (or ask your realtor to verify themfor you). Plans for expansion or winterizationmay be futile. Without being able to use the cot-tage year-round, the cottage’s marketability canbe adversely affected.

Zoning restrictions on rentalsIf the recreational home is not your primary res-idence and you are planning to use it only forlimited periods of time, you may wish to considerrenting your recreational home to generate extraincome. This income can help pay down yourmortgage or contribute to costs of maintenance,utilities, insurance, and so on.

However, you must be aware that districtbylaws vary from municipality to municipality.For example, in a resort community propertiescan be located in several different zones. Thiscould mean that some properties are located inzones that allow for both residential and tourismuse, while other areas do not allow rental periodsthat are less than 28 consecutive days becausethat is considered tourist accommodation and isnot allowed in some residential zones.

Some regions don’t specify rental periods intheir zoning bylaws. In some areas where tourismis promoted (for example, in areas near a skiresort) daily rentals are allowed. Some recre-ational properties are purchased solely to pro-vide rental accommodation.

In some areas there are no formal restric-tions on short-term rentals; however, bylaws aresubject to change. Make sure that you know whatthe municipal bylaws and zoning restrictions arepertaining to your property.

New-home warrantiesThere are pros and cons to consider when decid-ing whether to buy a new recreational home or aresale. Buying a new recreational home meansthat you may be able to choose or upgrade thefinishing materials, flooring, cabinets, and elec-trical features. As well, the building will complywith the latest building and electrical codes andenergy-efficiency standards, which will result inlower maintenance costs.

But more important, recreational home-buyers may want the security of new-home warranty

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8 Buy & sell recreational property in Canada

analysis (CMA) to verify if the price is within fairmarket value.

Second, it is common practice for sellers tohire the services of a listing agent. The listingagent has a code of ethics to which he or she isbound. He or she is also bound by the laws of thecountry and has a fiduciary duty to inform his orher client who is selling a property about thelegal importance of full disclosure. It is also thelisting agent’s responsibility to verify the accu-racy of the information being given to the poten-tial buyer. Not having an agent working onbehalf of the seller may raise questions regardingthe disclosure of water damage, mould problems,and other serious health and safety issues.

Buyers’ agents, in seeing that there is no list-ing agent to represent the seller, may find pur-chasing a FSBO a potential risk because there maynot be any confirmation about the history of theproperty or the accuracy of what is disclosed. Abuyer’s agent has a fiduciary duty to protect theclient’s interests, and the seller of a FSBO may notbe aware of his or her duty as an owner to dis-close all information. So, if you are buying arecreational property for the first time, retain abuyer’s agent to ensure that your interests areprotected at all times.

There are perhaps only two reasons for pur-chasing a FSBO. First, both parties can save onagents’ fees because there is no commission to bepaid. This may influence both parties in comingto an agreed-to price, which may or may not belower than fair market value. Second, a biddingwar is unlikely to happen. Because the propertyis not listed on the MLS, the chances of peoplefinding out about it (unless it is very well adver-tised) are reduced. Go to the following websitesfor more information regarding FSBOs:

• www.fsbo.ca

• www.homesellcanada.com

• www.forsalebyowner.com (US website)

programs that are available in most provinces.Contact a new-home warranty office or visit itswebsite for a list of registered builders in the areawhere you are considering purchasing. Althoughwarranty coverage varies from one province toanother, typically the programs guarantee labourand materials for your new home for at least oneyear after completion. The warranty also ensuresthat major structural defects will be corrected fora minimum of five years (and up to ten years insome provinces).

At present, warranties are required by law inOntario, Quebec, and British Columbia, and arevoluntary in most other provinces. In BritishColumbia, the law requires consumer coverageto be provided in the form of home warrantyinsurance, which is a bona fide insurance productthat can only be sold by government-approvedinsurance companies.

Comprehensive warranties on newly builtrecreational homes are readily available and eas-ily obtained. Even in provinces where the war-ranty is not mandatory, many lenders will notgrant you a mortgage unless you obtain a war-ranty. Clearly, a warranty is a good thing to get,as it offers you peace of mind.

Homes Directly for Sale by the OwnerSometimes you will find that a recreational prop-erty you are interested in is being sold by theowner, as a “For Sale by Owner” (FSBO, pro-nounced “fizbo”), usually because the sellerwants to save on agents’ fees. You should beaware of the advantages and disadvantages ofpurchasing a FSBO.

First, FSBOs tend to be priced according towhat the owner would like the homes to sell for,rather than what the market is willing to pay. Ifyou are looking at various types of properties,including FSBO properties, make sure that youragent provides you with a comparative market

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